There is immense value to a country in possessing nuclear weapons, at least in part because of the mythos that has grown up around them. Iraq didn't really have the ability to make nuclear weapons, but Saddam would be toasting his good health today if they did. [there are those who disagree] North Korea would still exist, since they managed to annoy their neighbors for a good long while without nuclear weapons, but everyone would take them far less seriously. Qaddafi thought that making nice with the US after the Second Gulf War would work, and you can see how well that worked for him.
However, for all that, there are a number of countries that plausibly could have developed nuclear weapons, and have chosen not to. Why not is a more interesting question than why.
Just this morning, the New York Times ran an Op Ed piece that illustrates the decay into which the concept of strategic deterrence has fallen. In "The Wisdom of Imagining the Worst-Case Scenario," Milton Viorst gives us some imaginary horribles to chew over in connection with a US invasion of Iraq. He suggests that by "moving into Saudi Arabia, Saddam Hussein would shift the battlefield far to the south, imposing on American troops a much heavier burden than just the capture of Baghdad." Such a move would put the operation of the Saudi oil fields at risk, and so the whole world's economy.
It's actually a little hard to imagine how Iraqi mainforce units could invade anything under the cover of US air supremacy, but it is not out of the question that Iraqi missiles could do some damage to the oil fields. However, these things would be only the beginning of evils. Suppose the Iraqis fire some bio-chemical weapons at Tel Aviv, and the Israelis nuke Baghdad? In that case:
As a matter of fact, a Pakistani nuclear strike would not "set off global chaos," though it would result in the end of the Pakistani state in short order. What would set off chaos would be if an Islamist government in Pakistan started handing out small nuclear devices as party favors to terrorists and criminal groups, something that elements of the Pakistani security services have hinted they might do. This would actually be far more like the situation we would face, should Iraq and Iran ever acquire the bomb.
Doubtless the sovereign suppliers of the technology of mass destruction could always maintain plausible deniability. They could feed the world's terrorist networks and black arms-markets with components, expertise, and occasionally sanctuary. Such countries rarely do anything blatant enough to constitute a traditional causus belli. Up until now, of course, it has been possible to strike at states that do such things, or to threaten them with retaliation: measures such as the air strikes on Libya by the Reagan Administration did much to transform the open support for terrorism displayed by some governments in the 1970s into the much more tactful attitude of the past 20 years or so. This is what is about to change.
A single, deliverable nuclear weapon grants a state a large measure of invulnerability. Even if Iraq were openly underwriting Al Qaeda's campaign against the United States, the US could not plausibly threaten to remove the government in Baghdad, if that meant that Tel Aviv, or Rome, or Paris, would go up in cinders as soon as the Rangers took the last Iraqi presidential bunker. Conventional aggression by such states could never be answered by conventional responses that posed an existential threat to their regimes. This is, in fact, much the situation that now confronts the US with regard to North Korea, a nuclear-armed failed-state that survives by exacting blackmail from the US and from its neighbors.
During the Cold War, deterrence served not just to prevent a nuclear exchange, but also to inhibit the direct use of conventional force by the US and the USSR. In the current era, deterrence has nearly the opposite effect; it still reduces the chance that weapons of mass destruction will be used, but it facilitates the use of force against the majority of the world's states that have no hope of acquiring an effective deterrent.
The dismaying thing about the Cold War was that, while it was on, there seemed to be no reason why it should not continue forever. That is not the case with the Terror War. The number of irresponsible states that seek to acquire the immunity afforded by weapons of mass destruction is not large. The arms networks they support are also limited in geography and resources. A consistent policy of preemption could end the danger worldwide in much less than a generation. Forcible regime change should be necessary in just a few cases; once it is clear the policy will be carried out consistently, no state will openly run the risk of falling within its ambit.
Then we will have deterrence we can live with.